Athens’ leftist government has taken a radical step in transforming the Greek state’s relations with the powerful Orthodox church, announcing an end to the status of clerics as civil servants.

In the biggest move yet towards the 11-million strong nation becoming a fully fledged secular country, officials said the public sector would cease to have any religious role.

“With this agreement 10,000 civil servant posts will be freed up,” said the government spokesman Dimitris Tzannakopoulos. “Although clerics are not exactly civil servants, in name they are, and are counted as civil servants.”

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The prime minister, Alexis Tsipras, an atheist, has said he was determined to overhaul the Greek state’s complex ties with the church. Progressives have long spoken of the need to separate church and state with the “historic” accord now being seen as key to achieving both.

Under a deal between the government and church, priests would be paid from a joint fund that would also manage earnings generated from properties whose ownership has long been disputed between the two bodies. Salaries, however, would still be dispensed by the state through an annual subsidy, set at €200m, that the church will receive.

The Greek church is by far the country’s richest institution with hotels, enterprises and other assets in its portfolio. The scale of such wealth frequently caused friction during Greece’s long-running financial crisis. Under the deal, revenues from properties whose ownership has been contested since the early 1950s would be split 50-50.

Tzannakopoulos said the accord also sought to ensure religious neutrality for a state long accused of prejudicing citizens who were not Greek Orthodox. Athens has faced fierce criticism for perceived violation of the rights of religious minorities, be they Muslims, Jehovah’s Witnesses or Catholics.

“Religious neutrality [means] that the Greek state will not be able to recognise certain religions with more or less rights,” Tzannakopoulos added. “But what doesn’t change is recognition of the fact that the Orthodox church has the overwhelming majority of [religious] faithful.”

Previous efforts to separate church and state have invariably stumbled on the innate social conservatism of a nation that has acknowledged the church’s role in preserving faith and language during 400 years of Ottoman rule. Even if few regularly attend Sunday service, the church has still been viewed as a central pillar of society.

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Cabinet members, highlighting its role in public life, were sworn in before the country’s ecclesiastical leadership in a tradition seen as both controversial and anachronistic.

The agreement, which had yet to be ratified by the cabinet and Holy Synod, the church’s governing body, was unveiled after Tsipras held talks late on Tuesday with Greece’s spiritual leader, Archbishop Ieronymos.

Within hours, the news had ignited a furious backlash with bishops condemning it as a betrayal. Ieronymos, a moderate, attempting to placate the outcry, insisted on Wednesday that the agreement was far from finalised. “Agreement is one thing. The intention to agree is another,” he said.

“An agreement has been announced [that outlines] the intention, the goodwill of both the church and the state to find a solution to problems that have lasted for almost a century … we have a big struggle ahead of us to say to our priests that whatever is to happen we will do together.”